Chapter 8 - Project Cost Management

Question 1

Cost Management

Answer 1

Creating the cost baseline and ensuring the project stays on budget

Includes the cost of ALL project resources: HR, materials, equipment, permits, and vendors

Question 2

Variable Cost

Answer 2

Costs that change as the project proceeds
Gas prices or airline tickets

Question 3

Fixed Cost

Answer 3

Costs that stay the same throughout the project

Location rentals, management wages, utilities

Question 4

Direct Cost

Answer 4

Costs that are included in the baseline

This is a cost that the project will incur, such as materials, equipment rentals, or project team wages

Question 5

Indirect Costs

Answer 5

Costs that are NOT included in the budget

Sponsor’s time spent helping with the project or ink for the printer

Question 6

Sunk Cost

Answer 6

Amount of money that has already been serpent on the project

Question 7

Value Engineering

Answer 7

Value analysis: finding a less costly way of doing work

Question 8

Traditional vs Agile

Answer 8

Traditional: the entire budget is calculated during planning

Agile: funded incrementally

Question 9

Plan Cost Management

Answer 9

Create the Cost Management Plan

Inputs: common inputs
Tools & techniques: common tools
Output: Cost Management Plan

Question 10

Cost Management Plan

Answer 10

How to estimate the cost of each activity, create the project budget, and monitor and control the cost of the project

Can include how to determine the level of accuracy on the estimates, and how the EVM will be used to control the cost

Question 11

Estimate Costs

Answer 11

Analyze each individual activity and assign a cost to each activity

Rough Order of Magnitude (ROM): most inaccurate, range -25% to +75%
Budget estimate: better, range -10% to +25%
Definitive estimate: very accurate and is done during the later parts of the planning process, range -5% to +10%

Question 12

Estimate Costs Process

Answer 12

Inputs: project management plan (cost management plan, quality management plan, scope baseline), project documents (project schedule, risk register, lessons learned register, resource requirements)
Tools & techniques: expert judgement, analogous estimating, parametric estimating, bottom-up estimating, three-point estimating, data analysis
Outputs: cost estimates (cost of each individual activity), basis of estimates (how the estimates were developed and their ranges - assumptions and constraints), project documents updates

Question 13

Cost Management Plan

Answer 13

Gives the steps needed to estimate costs

Question 14

Quality Management Plan

Answer 14

Steps the project team will take to ensure the project meets its quality requirements

Question 15

Scope Baseline

Answer 15

Includes the project scope, the WBS, and the WBS dictionary
Knowing the work that needs to be done and how it will be done will affect the cost of the project activities

Question 16

Project Schedule

Answer 16

Includes the network diagram, Gantt chart, and milestone chart
Knowing how long it will take to complete each activity will affect the cost

Question 17

Risk Register

Answer 17

Used to determine the amount of reserves needed for the activities

Question 18

Resource Requirements

Answer 18

The resources needed to complete each activity will affect the duration of each activity
Includes: people, equipment, and materials

Question 19

Analogous Estimating

Answer 19

A technique for estimating the duration or cost of an activity or project using historical data from a similar activity or project.
Top-down estimating
Quick to perform but could be very inaccurate

Question 20

Parametric Estimating

Answer 20

An estimating technique in which an algorithm is used to calculate cost or duration based on historical data and project parameters

Something multiplied by something or something divided by something

Question 21

Bottom-up Estimating

Answer 21

A method of estimating project duration or costs by aggregating the estimates of the lower-level components of the work breakdown structure (WBS)

Very accurate, can be very complex and time-consuming

Question 22

Reserve Analysis

Answer 22

Add reserve time to cover work risks

Contingency reserves: known unknowns
Included in the cost baseline and are within the control of the project manager

Management reserves: unknown unknowns
Added to the project by the organization’s management and are not included in the project cost baseline

Question 23

Cost of Quality

Answer 23

The amount of money you spend to ensure quality requirements are met on the project

Question 24

Cost Baseline

Answer 24

The approved version of the work package cost estimates and contingency reserves. Used to measure the performance of the project.

Known as the budget at completion (BAC)

Question 25

Cost Management Plan

Answer 25

A component of the project management plan that defines how the costs will be planned and controlled

States what inputs and tools to use to create the estimated cost of each activity

Question 26

Quality Management Plan

Answer 26

A component of the project management plan that describes how an organization’s quality policies will be implemented

Steps the project team will take to ensure the project meets it’s quality requirements

Question 27

Scope Baseline

Answer 27

Includes the project scope statement, WBS, WBS dictionary
Used as the basis for comparison to actual results
Part of the project management plan

Question 28

Cost Aggregation

Answer 28

Rolling up the activity costs into work packages and then the work packages into deliverables

Question 29

Funding Limit Reconciliation

Answer 29

When the organization limits the project funding
Might result in rescheduling of the project work

Question 30

Determine Budget Process

Answer 30

Inputs: project management plan, project documents, business documents, agreements
Tools & techniques: cost aggregation, expert judgment, historical information review, funding limit reconciliation, financing
Outputs: cost baseline funding requirements

Question 31

Control Costs

Answer 31

Part of monitoring and controlling
Try to keep the project on budget
Compare the planned work (project management plan) and the actual work (work performance data)